Indian equity markets weakened on September 17 after benchmark indices retreated significantly from their intraday highs, as investors turned cautious following the US Federal Reserve rate hike, profit booking at higher levels and technical resistance around key levels.

At 11:12 AM IST, the Sensex was down 94.43 points, or 0.13 percent, at 74,242.02, while the Nifty was nearly unchanged at 23,216.65. Market breadth remained positive, with 2,229 shares advancing against 1,365 declining, while 159 stocks were unchanged.

A key factor weighing on sentiment was the US Federal Reserve's decision to raise its benchmark interest rate by 25 basis points to a target range of 3.75 percent to 4 percent. The September 16 decision was approved unanimously and marked the first US rate increase since 2023. The Fed's updated projections also indicated that 16 of 18 policymakers expected at least one further 25 basis point increase by the end of 2026.

Higher US interest rates can influence global capital allocation by making US assets relatively more attractive and increasing funding costs. The rate outlook also weighed on Indian technology stocks, with the IT index down around 0.7 percent in morning trade. Investors remained concerned that tighter US monetary conditions could weigh on corporate technology spending in a key market for Indian software exporters.

Profit booking was another factor behind the market's retreat. The Sensex had declined around 350 points from its intraday high, while the Nifty traded close to 23,200 as investors used higher market levels to book gains. The movement reflected increased selling pressure after the initial strength in the session.

Technical factors also remained important. Market analysts indicated that the Nifty needs to decisively move above the 23,300 level for bullish momentum to strengthen. Failure to clear this resistance has kept traders cautious and increased the focus on whether the index can sustain moves above the level.

Liquidity concerns linked to the primary market also remained in focus as the National Stock Exchange's IPO opened for public subscription on September 17. The issue has a price band of Rs 1,700 to Rs 1,785 per share and is scheduled to remain open until September 21.

Ahead of the public issue, NSE raised Rs 6,746.18 crore from anchor investors, with overseas funds accounting for about 43 percent of the anchor allocation. The anchor book included participation from domestic and international institutional investors, including LIC, GIC, ADIA and Norges Bank.

The large IPO pipeline could temporarily absorb a portion of available market liquidity as investors allocate capital toward new issues. Arun Kejriwal, founder of Kejriwal Research and Investment Services, said the crowded IPO pipeline could result in substantial liquidity being absorbed by the primary market, potentially leaving the secondary cash market with comparatively less investor attention.

With the Fed moving toward tighter monetary conditions, the Nifty facing resistance around 23,300 and substantial capital being directed toward primary-market offerings, investors are closely watching whether the secondary market can regain momentum after the recent decline from intraday highs.